The recent news on oil, battery technology, solar impulse 2, the shifting chemical industry, and the state of the world economy is pointing towards one thing. The end of oil.
By 2020 the petroleum industry could be in sharp decline with companies too slow to pivot watching their stock price plummet. There are a number of factors contributing to the decline of oil and running out is not one of them. The rise of sustainable fuels might gain a niche market share once oil has died completely, possibly by 2030+ if they can break into replacement of kerosene and diesel. The decline of oil is a conflagration of multiple things, but the main reason is that technology will make combustion engines obsolete.
Lets take a look at how the world consumes energy.
The projected 2015 consumption of energy by Lawrence Livermore National Laboratory in the above figure shows that petroleum has about a 35% share of the entire energy sector. Of that 35.4% of energy a whopping 25.4% of that petroleum energy goes into transportation of people and goods. Only 8.2% of petroleum goes into powering industrial energy consumption (think chemical plants, metal/refractories, and petroleum distillation).
In the past few days Elon Musk made public Tesla’s Master Plan Part Duex where he unveiled his plans to 1) integrate energy generation and storage, 2) expand sustainable transportation, 3) increase autonomy of driving, and 4) make the personal car function much like Airbnb. This guy’s companies have landed rockets on the ocean and mostly delivered on his original Master Plan.
What is even more interesting is the pending acquisition of Solar City and the near completion of the Gigafactory. Decreasing costs of solar and wind energy installation and what has recently been reported by Bloomberg to be falling battery prices are all indicators that the consumption of oil is poised to drop.
If battery prices keep falling and the use of electric cars increases then it will create less demand for gasoline in the US Transportation Industry. The Tesla Model 3 is set for production in the summer of 2017. Additionally new battery technologies could make large battery energy storage a viable way to store excess solar electricity for use at night. The rise of Tesla, Solar City, and cheap batteries is actually been reported quite a bit, but there are more complications in the works for why oil is going to go even lower.
Bloomberg has also reported that oil has recently received a second blow that will drop it’s prices even lower. This is in part due to an oversupply of oil, but there will be less demand for oil from emerging markets like China. Oil is being produced so much that the US recently lifted a 40 year ban on oil exportation. So in addition to slowing demand for oil there is also an oversupply of it occurring right now.
Lets count that as 2 nails in the coffin for oil
Finally, the third reason I think oil will be just about obsolete as we enter 2020 is because many of the big chemical players have divested themselves from oil. Essentially the companies that have diversified out of petroleum chemicals and into more value added chemicals have done very well over the past few years. Additionally a historically petroleum based company like Shell has divested more of it’s oil business and invested more in natural gas. This is a clear signal that natural gas will most likely take over more market share in the electricity market and the electricity market will also expand to cover the growth number of electronic transportation modes.
This was my first non-fiction market based piece. If you liked it let me know and give me a follow and a like. Thanks for reading. Anthony Maiorana